Fitch Affirms Rwanda at ‘B+’ with Stable Outlook
Fitch Ratings has affirmed Rwanda’s Long-Term Issuer Default Ratings (IDRs) at ‘B+’ with a stable outlook. The country’s rating was supported by strong governance indicators relative to peers, high medium-term growth potential, the highly concessional nature of general government (GG) debt, and a record of strong official financial and technical support.
These strengths are constrained by the country’s low GDP per capita and persistent twin budget and current account deficits (CADs), which have resulted in high public and external indebtedness.
Ratings analysts said continued ceasefire violations between the Congolese paramilitary group M23 and the DRC armed forces, together with M23’s control over parts of eastern DRC, underscore the fragility of the US-brokered peace agreement signed by the DRC and Rwanda in December 2025 and ongoing Qatar-mediated talks.
Fitch’s baseline does not assume a sharp re-escalation of the conflict in the near term as seen in early 2025, although regional security risks remain elevated, limiting prospects for lasting stability.
Multilateral support, including the IMF’s new financing arrangement in June 2026, continues to underpin Rwanda’s access to concessional financing, and recent US sanctions on the Rwandan military and certain mining entities have not yet affected sovereign external financing inflows.
However, a sharp re-escalation of the conflict could lead to a sharp reduction in access to external financing. “We expect the CAD to widen to nearly 15% of GDP in 2026, reflecting resilient growth, higher imports for the Bugesera airport project and increased fuel and fertilizer costs linked to the Iran war”.
Persistent CADs, largely financed by FDI inflows and official borrowing, have led to a buildup of net external debt, which we forecast to reach 63% of GDP in 2026.
However, this is mitigated by the highly concessional nature of external debt (87%). We project reserve coverage to remain low, at 3.2 months of current external payments, underscoring the importance of continued access to external financing.
Fitch forecasts the fiscal deficit will be broadly unchanged at 4.5% of GDP in the fiscal year ending June 2027 (FY27) from 4.4% in FY26, as spending rationalisation, specifically through lower capex, is more than offset by weaker total revenue.
Tax reforms implemented since FY25 led to tax receipts exceeding the target by 0.6% of GDP in FY26, with further gains expected. However, Fitch expects total revenue growth to moderate in FY27 due to spillovers from the war in Iran, lower grants amid global aid cuts, and weaker non-tax receipts. Fitch expects total expenditure to fall 0.3pp to 23.8% of GDP, with capex falling to 7.2% of GDP, before rising in FY28.
The FY27 budget includes fertiliser subsidies of 0.1% of GDP, targeted for the agriculture season in 1HFY27, but excludes a provision for fuel subsidies, with a newly adopted government-to-government fuel arrangement with Oman expected to stabilise pump prices.
Fitch expects total revenue growth to recover in FY28, supported by an additional revenue package that ratings analysts assume will be implemented in 2HFY27 and is aimed at further VAT reform and e-invoicing.
However, declining grant disbursements, projected to fall to 1.7% of GDP in FY28 from 2.8% in FY25, will offset some gains in total revenue.
“We assume the FY27 deficit will be financed through a mix of domestic and external borrowing, with greater reliance on external sources, which are expected to remain largely concessional, containing interest costs”.
Rwanda benefits from sizeable external disbursement commitments from multilateral and bilateral partners, which Fitch estimates will account for about 82% of total external financing in FY27-FY28.
This support underpins Rwanda’s ability to meet its external financing requirements. Fitch forecasts GG debt will fall in FY27-FY28, averaging 65% of GDP, after peaking at about 74% in FY25.
The reduction will be driven largely by strong nominal GDP growth and, to a lesser extent, by spending consolidation efforts. Lower-than-anticipated nominal GDP growth, higher-than-anticipated project spending, or significant exchange rate depreciation — 82% of external debt is foreign currency denominated — are risks to our debt projections.
“We expect the debt burden to be mitigated by the highly concessional nature of external debt and the interest/revenue ratio to align with peers at about 13%”.
Fitch expects real GDP growth to remain strong at 7.8% in 2026 (above the ‘B’ median of 4.5%), albeit moderating from 9.4% in 2025 amid spillovers from the Iran war.
Growth will be supported by continued expansion in agriculture, services, and construction, notably the Bugesera airport, set to be completed in early 2028. Downside risks include delays in official disbursements and climate- or health-related shocks.
Fitch expects the central bank to maintain a tight policy stance, with inflation forecast to average 11.7% in 2026, above the bank’s 2%-8% target. This follows a cumulative 150bp rate hike to 8.75% since February 2026. Nigeria’s Foreign Reserves Top $54bn, Extend Import Cover
